China HealthCare buys into hospital
Company responds to the mainland's overhaul for a more affordable and accessible health system that provides opportunities for foreign players
Health care and consumer services provider China HealthCare Holdings plans to acquire the operating rights of an unspecified mainland hospital for HK$2.38 billion as it explores the opportunities created by Beijing's decision to reform the health sector.
The central government has been looking to bring in overseas investors as part of a sweeping overhaul of the health care system to make it more affordable and accessible.
In May, the State Council said in a reform plan it aimed to relax limits on foreign investment in hospitals.
One of the first overseas companies to respond to the initiative, China HealthCare in August announced it would collaborate with the Tianjin Catholic Patriotic Association and Yishi Catholic Social Service Centre to build and operate hospitals in Tianjin.
In its latest deal, the government-owned hospital will create a corporate entity with operating rights within 60 days and will then sell the rights to China HealthCare for 20 years.
A filing with the stock exchange said the health care operator would receive a management fee of not less than 90 per cent of the hospital's net profit.
The hospital has 650 beds and 20 clinical departments, including psychiatry, rehabilitation medicine and urology surgery.
"The hospital is applying for approval from the relevant government authority for an upgrade to a grade three general hospital," China HealthCare executive director Zhou Baoyi said in the company statement.
The target operator will also have interests in the operating rights of nine cancer treatment centres in hospitals in Nanjing, Jinan, Tianjin, Beijing, Changchun, Shanghai, Ningbo and Zhengzhou.
According to the agreement with these hospitals, the operator will be entitled to 51 to 100 per cent of the net profit of the cancer treatment centres and be responsible for providing the necessary medical equipment and managing the operations of the centres.
A framework agreement was signed to acquire the entire issued share capital of the hospital following its mandated corporatisation before the acquisition.
Of the HK$2.38 billion, China HealthCare said 71 per cent, or HK$1.69 billion, would be paid by issuing a five-year convertible note at 20 HK cents.
"The group's health-care-related service operation is looking to seize the development opportunity of the huge demand for health care services brought by the health care reform on the mainland," Zhou said in the company's results statement in June.
Shares of China HealthCare closed at 26.5 HK cents on Tuesday.
The company reported a loss of HK$67.6 million for the year to March, mainly because of its plan to diversify into distribution of cooling systems for high-speed trains.
